A sales associate at Harborside Health Center for just under a year, sells different varieties of California grown marijuana plants, "clones," to patients at the dispensary on Thursday January 27, 2011 in Oakland, Calif. Under a plan drafted by Oakland Councilwoman Desley Brooks, the size of the farms would be scaled back and growing duties would be placed under the control of dispensaries - giving them more overall control of the California medical marijuana saga.

When the federal government tried to confiscate more than $500,000 from the operators of illegal bingo games in Tennessee in 1994, a federal appeals court ruled that the seizure was too late because government agents had known about the lawbreaking more than five years earlier.

Like the fund-skimming at the Tennessee bingo parlors, Oakland says the federal government was well aware that Harborside was distributing marijuana from the time the dispensary opened in 2006 - the date that triggered a strict five-year deadline for any government attempt to seize the property.

The city's lawsuit, filed Wednesday in federal court in San Francisco, challenged U.S. Attorney Melinda Haag's forfeiture action in July against the dispensary at 1840 Embarcadero, along the Oakland Estuary.

It was the latest of hundreds of medical marijuana outlets that California's four regional U.S. attorneys have sought to close since October 2011 by suing or threatening to sue their landlords for violating federal drug laws.

Haag's other targets had been within 1,000 feet of schools, parks or playgrounds. In announcing the action against Harborside, she cited not its location but the size of its operations, which serve 108,000 patients. The larger the dispensary, "the greater the likelihood that there will be abuse of the state's medical marijuana law," she said.

Oakland's lawsuit said the closure would damage the city, which expects to collect more than $1.4 million this year in business taxes from Harborside and three other city-licensed pot dispensaries, and would force patients to resort to buying marijuana from illegal and unregulated street dealers.

Presidential promises

The city also argued that it relied on promises by President Obama and his Justice Department, which said in public statements, congressional testimony and a 2009 memo that federal authorities would not prosecute marijuana suppliers who complied with state laws. Federal judges have rejected similar arguments by dispensary operators, finding that the government made no binding promises to them.

But Oakland's principal argument is based on a 1998 case titled United States vs. $515,060.42 in U.S. Currency. That's the amount the government claimed in a forfeiture suit against the operators of bingo games in Knoxville, Tenn., where a purportedly charitable enterprise was used as a front for profit-skimming.

The suit was filed after federal agents seized the money in March 1994. The FBI and the Internal Revenue Service had been investigating the operation since 1988, and an IRS agent testified she knew by the fall of 1988 that proprietors were running an illegal gambling business and storing the proceeds in their homes.

Under the statute of limitations, said the Sixth U.S. Circuit Court of Appeals in Cincinnati, the government had five years to seek forfeiture from the time it knew, or should have known, that the crime was being committed - a deadline it missed by six months.

Continued lawbreaking?

Government lawyers argued that the crime was an ongoing offense, and that every day of continued lawbreaking started a new five-year timetable. The court disagreed, saying the deadline runs from the date the crime is first discovered.

The same law and the same arguments apply to the Harborside case, said Cedric Chao, a lawyer for Oakland. Although the 1998 ruling is not binding on federal courts in California, he said, it provides strong authority for the city's position.

Harborside and the other city-licensed dispensaries, Chao said, operate "right out in the open. They want people to know what they're doing."